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Wood Bioenergy: Cellulosic Ethanol Projects Remain Doubtful

In evaluating the potential wood demand and timber investment implications of evolving bioenergy markets, we begin by organizing announced wood-using bioenergy projects into three technological categories:  pellets, wood-to-electricity, and cellulosic ethanol.  Then, as a first step, we screen out cellulosic ethanol projects.  Why?  While wood pellet and boiler-based electricity technologies have been around for decades and proven operable at scale, cellulosic ethanol, which embodies the dream of turning renewable forests and wood residues into liquid fuel for powering vehicles, remains unproven and questionable as an investment.  Currently, the primary challenges of cellulosic ethanol include technology, financing and quality.

To date, no project exists that can produce, at scale, cellulosic ethanol economically.  Production costs are too high.  The primary challenge remains the efficient break down of cellulose, a core focus of bioenergy bench research. For example, last month, The Economist magazine noted that two Danish firms announced advances in this area through producing cheaper enzymes to take on this task. America’s biofuel muddle: coming up empty, March 27, 2010.

Financing is scarce.  Projects rely on grants, loan guarantees and subsidies.  Range Fuels in Soperton, Georgia has received in excess of $150 million in federal grants without producing, to date, any cellulosic ethanol.  As Minnesota Public Radio reported, Future of cellulosic ethanol remains uncertain, April 26, 2010.

Finally, and fundamentally, ethanol is a poor quality fuel.  It corrodes pipelines and engines; it generates but two-thirds the energy of gasoline; and it survives today in the US as an additive, not as a stand-alone fuel.

Tellingly, the Environmental Protection Agency (EPA) cut to size its 2010 mandate for cellulosic ethanol production in the US from 100 million gallons to 6.5 million gallons.

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